Many believe that employment practices lawsuits are only a risk for large design firms with hundreds of employees. However, when you carefully examine the exposure, it becomes clear that small firms need to be just as careful, if not more so. Consider these risks posed to small and mid-sized firms:
- Smaller design firms generally have less robust employee codes and procedures. This can create confusion and uncertainty in the event of a claim.
- Instead of an entire HR department, a principal of the company with no HR experience often fills the Human Resources role. This inexperience and conflict of interest often gives rise to claims.
- Lower and upper level employees interact far more frequently in a smaller environment, creating more opportunities for issue.
- Many small firms consider their staff a "family", and thus they let their guard down, ignoring any possibility of an employment practices dispute.
Now let's take a look at a claim filed against a mid-size architectural firm for age discrimination.
A 64 year-old controller for a mid-size architectural firm was terminated by a 45 year-old principal after another employee complained that the controller created a threatening and hostile work environment. The former employee of 20 plus years filed a lawsuit alleging age discrimination and cited a number of incidents where the 45 year-old principal made derogatory, albeit offhand remarks about his age.
The defense budget was set at $385,000
The case resolved for a total of $400,000 at mediation. Defense costs totaled $180,000.
If you're an XL Catlin insured, you can add Employment Practices coverage onto your Professional Liability policy by answering just a few questions. As always, please contact your account representative, and they would be happy to provide you with a quote.
This Claim of the Week was selected from XL Catlin's Employment Practices Liability Claims Team.